Case 2:17-cv-08419-RGK-PLA Document 113 Filed 05/23/18 Page 1 of 9 Page ID #:4476
`Case 2:17-cv-08419-RGK-PLA Document 113 Filed 05/23/18 Page 1 of 9 Page ID #:4476
`
`UNITED STATES DISTRICT COURT
`
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES - GENERAL
`
`Case No.
`
`2:17-cv—08419—RGK-PLA
`
`Date May 23, 2018
`
`Title
`
`Fulfillium, Inc. v. ReShape Medical, Inc.
`
`Present: The Honorable R. GARY KLAUSNER, UNITED STATES DISTRICT JUDGE
`
`Sharon L. Williams
`
`Not Reported
`
`Deputy Clerk
`
`Court Reporter / Recorder
`
`N/A
`
`Tape No.
`
`Attorneys Present for Plaintiff:
`
`Attorneys Present for Defendant:
`
`Not Present
`
`Not Present
`
`Proceedings:
`
`(IN CHAMBERS) Order Re: Motion for Leave to file a Second Amended
`Complaint (DE 94)
`
`I.
`
`INTRODUCTION
`
`On April 20, 2017, Fulfillium Inc. (“Fulfillium”) filed a Complaint for trade secret
`misappropriation and patent infringement against ReShape Medical, Inc. The Complaint was first filed
`in the US. District Comt for the District of Delaware and transferred to this Court on November 9,
`
`2017. Fulfillium filed a First Amended Complaint (“FAC”) on November 20, 2017, in response to the
`Delaware district court’s dismissal of its trade secret claims with leave to amend. (See Order Re: Mot. to
`Dismiss, ECF No. 33.) ReShape Medical, Inc. then filed a motion to dismiss Fulfillium’s FAC, which
`this Court denied. (See Order Re: Mot. to Dismiss FAC, ECF No. 74.)
`
`Fulfillium previously sought leave to add SV Health Investors, LLC (“SV Health”) and an
`additional patent infiingement claim on October 10, 2017 and February 5, 2018, respectively. At the
`March 19, 2018 scheduling conference, the Court procedurally struck the motions and directed
`Fulfillium to refile any requests for leave to amend in a single motion. (ECF No. 89.) In accordance
`with this Court’s order, Fulfillium filed the present motion for leave to file a Second Amended
`Complaint (“SAC”). As before, Fulfillium seeks leave to add an additional patent infiingement claim
`and to add SV Health as a defendant. In addition, Fulfillium seeks to add ReShape Lifesciences, Inc.
`(“ReShape Lifesciences”) as a defendant.
`
`For the following reasons, the Court GRANTS in part and DENIES in part Fulfillium’s
`motion for leave to amend.
`
`II.
`
`FACTUAL BACKGROUND
`
`A.
`
`Current Factual Allegations
`
`The following facts are alleged in the FAC.
`
`CV—90 (06/04)
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`Case 2:17-cv-08419-RGK-PLA Document 113 Filed 05/23/18 Page 2 of 9 Page ID #:4477
`Case 2:17-cv-08419-RGK-PLA Document 113 Filed 05/23/18 Page 2 of 9 Page ID #:4477
`
`UNITED STATES DISTRICT COURT
`
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES - GENERAL
`
`Case No.
`
`2:17-cv—08419—RGK-PLA
`
`Date May 23, 2018
`
`Title
`
`Fulfillium, Inc. v. ReShape Medical, Inc.
`
`Fulfillium owns two patents titled “Methods, Devices, and Systems for Obesity Treatment” US.
`Patent Nos. 9,456,915 (“the ’915 Patent”) and the 9,445,930 (“the ’930 Patent”). Both are directed to a
`bariatric medical device and procedure to treat obesity conceived of by Dr. Richard D.Y. Chen
`(“Chen”), whereby a balloon device is inserted into a person’s stomach to safely reduce the stomach’s
`volume and impede the flow of ingested food. The United States Patent and Trademark Office (“PTO”)
`issued the ’915 and ’930 Patents on October 4, 2016 and September 20, 2016, respectively.
`
`Chen formed Fulfillium in 2004 to develop and market his balloon device. When raising venture
`capital in Fulfillium’s early stages, Chen met with employees at SV Life Sciences, which later became
`SV Health, and Sprout Partners, which later reformed as New Leaf Venture Partners (“New Leaf”).1
`During these meetings, Chen disclosed such trade secrets as Fulfillium’s preferred clinical trial design
`and regulatory approval strategy. Chen always ensured the disclosures were subject to oral or written
`agreements of confidentiality.
`
`Chen eventually met with George Wallace (“Wallace”), a venture partner for SV Health, to
`negotiate the terms and conditions under which Wallace would work with Fulfillium. The negotiations
`fell apart when Wallace demanded a greater than 25% stake in Fulfillium after the first round of
`financing. Chen never disclosed any trade secrets to Wallace.
`
`Rather than work with Fulfillium, decision makers in SV Health launched Abdominis, Inc in
`2005 with Wallace as CEO. SV Health and New Leaf flmded Abdominis, Inc., provided direct guidance
`in its development, and controlled its operations through board membership. Abdominis, Inc. was later
`renamed ReShape Medical, Inc.
`
`SV Health and New Leaf provided Wallace and ReShape Medical, Inc. with Fulfillium’s
`technology and trade secrets, including three key aspects of his clinical trial playbook. ReShape
`Medical, Inc. used that information to raise capital, design a competing product and procedure design
`(the “ReShape Balloon” device and treatment method), and develop a successful Food and Drug
`Administration (“FDA”) clinical trial design. The ReShape Balloon device infringes on claims 1, 2, and
`4—27 of Fulfillimn’s ’915 Patent and claims 1, 2, 4—19, 21—27, and 30 of the ’930 Patent. In general,
`these claims relate to the gastric balloon structure, including the use of a flexible central spine, and a
`valve structure that introduces fluid to inflate the balloon chambers after the device is inserted in the
`
`patient’s stomach. ReShape Medical, Inc. began commercial operations after it obtained pre-market
`FDA approval in July 2015. In so doing, ReShape shut Fulfillium out of the market.
`
`1 The Court will refer to both SV Life Sciences and Sprout Partners by their current names (SV Health and New Life)
`throughout this Order.
`
`CV—90 (06/04)
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`CIVIL MINUTES — GENERAL
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`Case 2:17-cv-08419-RGK-PLA Document 113 Filed 05/23/18 Page 3 of 9 Page ID #:4478
`Case 2:17-cv-08419-RGK-PLA Document 113 Filed 05/23/18 Page 3 of 9 Page ID #:4478
`
`UNITED STATES DISTRICT COURT
`
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES - GENERAL
`
`Case No.
`
`2:17-cv—08419—RGK-PLA
`
`Date May 23, 2018
`
`Title
`
`Fulfillium, Inc. v. ReShape Medical, Inc.
`
`B.
`
`Proposed Additional Allegations
`
`In its proposed SAC, Fulfillium seeks to allege the following additional facts.
`
`SV Health and its predecessor SV Life Sciences have at all relevant times held one or more seats
`on ReShape Medical, Inc.’s board of directors. SV Health’s website describes its investors as “hands-on
`business partners” who ‘Wvork hands-on with [their] portfolio companies as trusted advisers and partners
`from formation to exit” and whose experience allows them to "Work as true partners with [their
`entrepreneurs, and develop strong relationships with them through the full life cycle of their ventures.”
`(Proposed SAC 1] 6, Mot. for Leave to Amend Ex. 1, ECF No. 94-3.) Because SV Health and its
`predecessor “directed, controlled, actively induced and/or conspired with ReShape Medical, Inc., and
`subsequently ReShape Medical LLC,” to take the actions at issue.
`
`EnteroMedics, Inc. acquired ReShape Medical, Inc. on October 2, 2017, and later renamed itself
`ReShape Lifesciences. A new entity, ReShape Medical LLC, resulted from the merger. ReShape
`Medical LLC and ReShape Lifesciences now hold ReShape Medical, Inc. ’s liabilities. ReShape Medical
`LLC and ReShape Lifesciences also continue to sell the infringing ReShape Balloon.
`
`Fulfillium filed a continuation application for additional claims relating to its gastric balloon
`device. The PTO issued the resulting patent, US. Patent No. 9,808,367 (“the ’367 Patent” , on
`November 7, 2017 — about seven months after Fulfillium brought its original complaint. Fulfillium
`alleges that the ReShape Balloon also infringes on claims 1, 2, 4—7, 11, 12, and 16—21 of the ’367
`Patent.
`
`III.
`
`JUDICIAL STANDARD
`
`Pursuant to Federal Rule of Civil Procedure 15, “[a] party may amend its pleading once as a
`matter of course before being served with a responsive pleading .
`.
`.
`. [but in] all other cases, a party may
`amend its pleading only with the opposing party’s written consent or the court’s leave.” Fed. R. Civ. P.
`15(a). The Court should “freely give leave when justice so requires.” Id.
`
`The Supreme Court has held that ‘fimdue delay, bad faith or dilatory motive on part of movant,
`repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to opposing
`party by virtue of allowance of amendment, and futility of amendment” are sufficient reasons for a
`district court to deny leave. Foman v. Davis, 371 US. 178, 182 (I962); Howey v. United States, 481
`F.2d 1187, 1190 (9th Cir. 1973). Absent a showing of any of the above reasons for denying leave, “there
`exists a presumption under Rule 15(a) in favor of granting leave to amend.” Eminence Capital, LLC v.
`Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003).
`
`CV—90 (06/04)
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`Case 2:17-cv-08419-RGK-PLA Document 113 Filed 05/23/18 Page 4 of 9 Page ID #:4479
`Case 2:17-cv-08419-RGK-PLA Document 113 Filed 05/23/18 Page 4 of 9 Page ID #:4479
`
`UNITED STATES DISTRICT COURT
`
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES - GENERAL
`
`Case No.
`
`2:17-cv—08419—RGK-PLA
`
`Date May 23, 2018
`
`Title
`
`Fulfillium, Inc. v. ReShape Medical, Inc.
`
`IV.
`
`DISCUSSION
`
`As an initial matter, the Court notes the parties agree to substitute current defendant ReShape
`Medical, Inc. with ReShape Medical LLC. The Court accordingly ORDERS ReShape Medical LLC
`be substituted for ReShape Medical, Inc. as the named defendant. The Court will refer to the defendant,
`including each of its predecessor entities, as “ReShape” for the remainder of this order.
`
`ReShape opposes Fulfillimn’s motion for leave to amend to allege infringement of the ’367
`Patent, to add SV Health as a defendant, and to add ReShape Lifesciences as a defendant. The Court
`addresses the arguments against each proposed amendment in tlun.
`
`A.
`
`Leave to Amend to Allege Infringement of the ’367 Patent
`
`Fulfillium seeks leave to amend so that it can add a claim of infringement of the ’367 Patent.
`ReShape argues that the proposed amendment is futile, sought in bad faith, and prejudicial.
`
`I.
`
`F”ti/I'm
`
`A proposed amended complaint is futile if it would be immediately “subject to dismissal” under
`Rule 12(b)(6). Novak v. United States, 795 F.3d 1012, 1020 (9th Cir. 2015) (quoting Sreckman v. Hart
`Brewing, Inc, 143 F.3d 1293, 1298 (9th Cir. 1998)). To survive a motion under Rule 12(b)(6), a
`complaint must contain “sufficient factual matter, accepted as true, to ‘state a claim to relief that is
`plausible on its face.’” Ashcrofi v. Iqbal, 556 US. 662, 678 (2009) (quoting Bell At]. Corp. v. Twomb/y,
`550 US. 554, 570 (2007)).
`
`ReShape argues granting leave to add a claim for infringement of the ’367 Patent would be futile
`for two reasons. First, the patent is unenforceable because of inequitable conduct. Second, the patent is
`unenforceable because a part—owner of the ’367 Patent did not sign the terminal disclaimer as required to
`obviate a double patenting rejection.
`
`(1.
`
`Inequitable Conduct
`
`A patent is unenforceable for inequitable conduct if an applicant fails to disclose material
`information with an intent to deceive the Patent Examiner. Exergen Corp. v. Wal-Mart Stores, Inc, 575
`F.3d 1312 (Fed. Cir. 2009). Burying a reference known to be material in a list of other references with
`no attempt to highlight it for the Examiner can be probative of intent to deceive, although it does not
`conclusively prove inequitable conduct. Molins PLC v. Terrron, Inc, 48 F.3d 1172, 1184 (Fed. Cir.
`1995). In Molins, patent applicants realized they had neglected to cite material prior art. Soon after, the
`applicants submitted a supplemental document listing 94 references, including the omitted material
`
`CV—90 (06/04)
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`Case 2:17-cv-08419—RGK-PLA Document 113 Filed 05/23/18 Page 5 of 9 Page ID #:4480
`
`UNITED STATES DISTRICT COURT
`
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES - GENERAL
`
`Case No.
`
`2:17-cv—08419—RGK-PLA
`
`Date May 23, 2018
`
`Title
`
`Fulfillium, Inc. v. ReShape Medical, Inc.
`
`reference. The examiner indicated he considered all of the cited prior art before issuing the patent. Under
`these facts, the Federal Circuit found insufficient evidence of intent.
`
`ReShape argues Fulfillium intentionally buried amongst 167 other references a citation to
`material office actions in which the Examiner rejected two related patent applications for lack of written
`description support. It is undisputed, however, that Fulfillium referenced those office actions on the first
`page of an Information Disclosure Statement filed with its application and further provided PDF copies
`of the office actions to the Examiner. In addition, the Examiner indicated that she considered the office
`actions at issue. On these facts, the Court cannot say Fulfillium engaged in inequitable conduct such that
`it would be futile to permit Fulfillium to assert a claim for infringement of the ’367 Patent.
`
`b.
`
`Terminal Disclaimer
`
`A provisional double patenting rejection was filed during prosecution of the ’367 Patent,
`triggering a requirement for all application owners to sign a terminal disclaimer to cure (or “obviate”)
`the rejection. See Manual of Patent Examining Procedure (“MPEP”) § 1490; Applied Materials, Inc. v.
`Semiconductor Materials Am. Inc., 98 F.3d 1563, 1576—77 (Fed. Cir. 1996). Fulfillium filed a terminal
`disclaimer in which it was the sole signatory. The ’367 Patent is a continuation of US. Patent
`Application No. 11/282,224 (“the ’224 application”), entitled Wireless Breach Detection. Chen assigned
`to Sensurtec, Inc. all right, title, and interest in the ’224 application, the invention described therein, and
`in any patents “which may hereafler be granted on the same.” Thus, ReShape argues Sensuretec, Inc. is
`a co-owner of the ’367 Patent and was required to sign the terminal disclaimer. Because Sensuretec, Inc.
`did not sign the disclaimer, ReShape argues it is unenforceable and Fulfillium must seek reissue of the
`patent before it can enforce it.
`
`Fulfillium disputes that Sensuretec, Inc. owns any interest in the ’367 Patent. Indeed, it appears
`the ’224 application and the invention it describes relate solely to wireless breach detection, while the
`’367 Patent ultimately traces back to a separate chain of patents — owned wholly by Fulfillium — that
`relate to gastric devices and methods for obesity treatment. (See Pl.’s Reply at 8, ECF No. 100.) In
`addition, even if the terminal disclaimer were ineffective, ReShape cites no authority for its contention
`that Fulfillium can cure the rejection only by seeking reissue of the ’367 Patent. As Fulfillium argues in
`its Reply, the Federal Circuit has indicated that an applicant can file a terminal disclaimer for an issued
`patent to overcome invalidity based on double patenting. Perricone v. Medicis Pharm. Corp, 432 F.3d
`1368, 1375 (Fed. Cir. 2005).
`
`2.
`
`Bad Faith
`
`“In the context of a motion for leave to amend, ‘bad faith’ means acting with intent to deceive,
`harass, mislead, delay, or disrupt.” Bad faith implies an improper motive in seeking leave amend, such
`
`CV—90 (06/04)
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`Case 2:17-cv-08419-RGK-PLA Document 113 Filed 05/23/18 Page 6 of 9 Page ID #:4481
`
`UNITED STATES DISTRICT COURT
`
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES - GENERAL
`
`Case No.
`
`2:17-cv—08419—RGK-PLA
`
`Date May 23, 2018
`
`Title
`
`Fulfillium, Inc. v. ReShape Medical, Inc.
`
`as adding a defendant for the sole purpose of destroying the court’s jurisdiction, see Sorosky v.
`Burroughs Corp. _, 826 F.2d 794, 805 (9th Cir. 1987), or “seeking to prolong the litigation by adding new
`but baseless legal theories,” Griggs v. Pace American 677)., Inc, 170 F.3d 877, 881 (9th Cir. 1999).
`
`ReShape’s bad faith allegations stem fiom a June 1 meeting held to discuss the possibility of
`early settlement. According to ReShape, it provided Fulfillium with a detailed presentation of its
`defenses, including that the allegedly infringed patents are unenforceable for inequitable conduct
`because Fulfillium failed to properly disclose material information in the underlying applications.
`ReShape argues that Fulfillium rushed to file the ’367 Patent application two weeks later in an attempt
`to cure the deficiencies ReShape identified in the meeting. ReShape continues to assert that each of the
`Fulfillium patents at issue are fraudulent, unenforceable, and being used to harass ReShape. Fulfillium
`counters that all of its applications properly made the required disclosures, and that regardless it planned
`to apply for the ’367 Patent application long before the June 1 meeting.
`
`Fulfillium’s previous claims of patent infringement survived a motion to dismiss, and as
`explained above, Fulfillium’s claim regarding the ’367 Patent is likewise not immediately subject to
`dismissal. As Fulfillium appears to have a good faith basis for its claim, the Court will not deny leave to
`amend on this ground.
`
`3.
`
`Preiua’ice
`
`The opposing party bears the burden of showing that granting leave to amend will result in
`prejudice. DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 187 (9th Cir. 1987) (citing Beeck v. Aqua-
`slide ‘N’Dive Corp, 562 F.2d 537, 540 (8th Cir. 1977)). In general, “[t]he need for additional discovery
`is insufficient by itself to deny a proposed amended pleading.” In re Circuit Breaker Litig., 175 F.R.D.
`547, 551 (C.D. Cal. 1997). However, the Ninth Circuit has found undue prejudice where an amendment
`would raise different legal theories and require proof of different facts such that it would necessitate
`substantial additional discovery at a late stage in the litigation. See AmerisourceBergen Corp. v. Dialysis
`West, Inc, 465 F.3d 946, 953 (9th Cir. 2006).
`
`The FAC already alleges infringement of 26 claims of the ’915 Patent and 26 claims of the ’930
`Patent. Now, Fulfillium seeks to assert infringement of an additional 14 claims of the ’367 Patent.
`ReShape argues that the addition of 14 patent claims to the 52 already asserted would be too large a
`burden because each new patent claim requires separate analysis and investigation. The Court disagrees.
`
`The ’367 Patent is directed to the same gastric balloon device as the ’915 and ’930 Patents. All
`three patents are from the same patent family; they have the same title, inventors, and assignee. The
`ReShape Balloon is alleged to infringe all three patents. ReShape has not shown that the ’367 Patent
`would raise different legal theories or require proof of different facts such that it could not be fully
`
`CV—90 (06/04)
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`Case 2:17-cv-08419—RGK-PLA Document 113 Filed 05/23/18 Page 7 of 9 Page ID #:4482
`
`UNITED STATES DISTRICT COURT
`
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES - GENERAL
`
`Case No.
`
`2:17-cv—08419—RGK-PLA
`
`Date May 23, 2018
`
`Title
`
`Fulfillium, Inc. v. ReShape Medical, Inc.
`
`prepared to litigate when the trial date arrives in seven months. See Fund Tr. ofPlumbing, Heating &
`Piping Indus. ofS. Cal, 648 F.2d 1252, 1254 (9th Cir. 1981) (finding no prejudice where the operative
`facts remained the same and the opposing party “should be fully prepared to litigate” the newly added
`claim).
`
`4.
`
`Conclusion
`
`Because ReShape has shown no adequate reason to deny leave to amend, the Court GRANTS
`Fulfillium leave to amend to assert a claim for infiingement of the ’367 Patent.
`
`B.
`
`Leave to Amend to Add SV Health as a Defendant
`
`Fulfillium also seeks leave to amend to add SV Health as a defendant. In opposition, ReShape
`argues that adding SV Health as a defendant is futile because the factual allegations are insufficient to
`support any basis of liability for the alleged trade secret misappropriation or patent infringement.
`
`To state a cause of action for trade secret misappropriation, a plaintiff must plead that “(1) the
`plaintiff owned a trade secret, (2) the defendant acquired, disclosed, or used the plaintiff’s trade secret
`through improper means, and (3) the defendant’s actions damaged the plaintiff.” Cytodyn, Inc. v.
`Amerimnmne Pharm, Inc., 160 Cal. App. 4th 288, 297 (2008); see Cal. CiV. Code § 3426.1(b). The
`Court already held in a previous order that Fulfillium adequately alleged that aspects of its clinical trial
`playbook are trade secrets, and ReShape does not dispute that damages are adequately pled. (See Order
`Re: Motion to Dismiss FAC at 6, ECF No. 74.) Thus, at issue is whether Fulfillium pleads sufficient
`facts to support SV Health’s involvement in the alleged misappropriation.
`
`Fulfillium alleges that Chen disclosed Fulfillium’s trade secrets to SV Health subject to a
`confidentiality agreement, that SV Health then proceeded to launch ReShape, that ReShape used
`Fulfillium’s trade secrets to develop a clinical trial design for a competing product, and that SV Health
`was the only possible source of those trade secrets. In addition, Fulfillium asserts that SV Health
`directed, induced, or conspired with ReShape to misappropriate Fulfillium’s trade secrets. In support,
`Fulfillium alleges that SV Health appointed one of its venture partners, Wallace, as ReShape’s CEO,
`maintained membership on ReShape’s board, and professed on its website that it works “hands on” with
`its portfolio companies as “true partners.”2 These allegations are sufficient to implicate SV Health in the
`alleged misappropriation.
`
`2 With the exception of the statements on SV Health’s website. which appear to provide little if any evidence of SV Health’s
`actual conduct in this case. these facts were known to Fulfillium from the outset of the litigation. and are already pled in the
`FAC. Given its knowledge of SV Health’s alleged involvement, it is unclear why Fulfillimn did not sue SV Health originally.
`
`CV—90 (06/04)
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`Case 2:17-cv-08419-RGK-PLA Document 113 Filed 05/23/18 Page 8 of 9 Page ID #:4483
`
`UNITED STATES DISTRICT COURT
`
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES - GENERAL
`
`Case No.
`
`2:17-cv—084l9—RGK-PLA
`
`Date May 23, 2018
`
`Title
`
`Fulfillium, Inc. v. ReShape Medical, Inc.
`
`While the trade secret misappropriation claim is explicitly asserted against “Defendants” and
`includes factual allegations against SV Health, none of the three patent infringement claims in the
`proposed SAC include any allegations directly against SV Health. Those claims refer only to “ReShape
`Medical LLC and ReShape Lifescience’s infringement.” (See, e.g. , Proposed SAC 111] 55—57, 119, Mot.
`to Amend Ex. 1, ECF No. 94—3.) Likewise, Fulfillium’s Motion and Reply both appear to argue only that
`SV Health may be liable for trade secret misappropriation. (See P1.’s Mot. at 8, ECF No. 94-1; Pl.’s
`Reply at 11, ECF No. 100.) In the absence of any clear allegations of patent infringement against SV
`Health, the Court agrees that it would be futile to assert a patent infringement claim against them.
`
`The Court accordingly GRANTS Fulfillium’s motion for leave to amend to add SV Health as a
`defendant only as to its trade secret misappropriation claim. To the extent Fulfillium intended to assert a
`patent infringement claim against SV Health, it is not permitted to do so.
`
`C.
`
`Leave to Amend to Add ReShape Lifesciences as a Defendant
`
`Fulfillium also seeks leave to add ReShape Lifesciences as a Defendant. ReShape again argues
`that doing so would be futile, as Fulfillium pleads insufficient facts to hold ReShape Lifesciences
`directly liable for any wrongdoing or to hold it liable for the alleged acts of its subsidiary.
`
`A parent corporation is generally not liable for the acts of its subsidiaries. United States v.
`Besy’oods, 524 US. 51, 61 (1998). To hold a parent company liable for its subsidiaries’ infringement or
`misappropriation, the plaintiff must show the circumstances justify “piercing the corporate veil,” such as
`if the parent company was an alter ego of the subsidiary or controlled the conduct of the subsidiary. A.
`Stucki Co. v. Worthington Inds., Inc., 849 F.2d 593, 596 G’ed. Cir. 1988).
`
`ReShape argues that Fulfillium improperly attempts to impose liability for patent infringement
`on ReShape Lifesciences merely because it is ReShape’s parent company. The Court agrees that
`Fulfillium cannot seek to hold ReShape Lifesciences liable for ReShape’s infringement under the facts
`alleged. Fulfillium, however, alleges that ReShape Lifesciences itself is now selling the infringing
`ReShape Balloon. Indeed, the ReShape Balloon is promoted and offered for sale on ReShape
`Lifesciences’ website. Whether Fulfillium can ultimately prove that ReShape Lifesciences committed
`patent infringement remains to be seen, but its allegations are sufficient to state a plausible claim.
`
`As to trade secret misappropriation, Fulfillium’s proposed SAC merely alleges that ReShape
`Lifesciences acquired ReShape’s liabilities through the merger and that it might continue to rely on or
`
`However, ReShape does not argue that Fulfillium’s delay was undue or prejudicial, and the Court finds SV Health would
`have time to prepare for litigation if added as a defendant at this stage.
`
`CV—90 (06/04)
`
`CIVIL MINUTES — GENERAL
`
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`Case 2:17-cv-08419-RGK-PLA Document 113 Filed 05/23/18 Page 9 of 9 Page ID #:4484
`Case 2:17-cv-08419-RGK-PLA Document 113 Filed 05/23/18 Page 9 of 9 Page ID #:4484
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`UNITED STATES DISTRICT COURT
`
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES - GENERAL
`
`Case No.
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`2:17-cv—084l9—RGK-PLA
`
`Date May 23, 2018
`
`Title
`
`Fulfillium, Inc. v. ReShape Medical, Inc.
`
`profit from ReShape’s misappropriation. It does not allege any act of misappropriation by ReShape
`Lifesciences, nor does it allege any facts to support piercing the corporate veil. Thus, the proposed trade
`secret misappropriation claim against ReShape Lifesciences would be immediately subject to dismissal.
`Permitting this amendment would be futile.
`
`The Court accordingly GRANTS Fulfillium leave to amend to assert a patent infringement claim
`against ReShape Lifesciences, but DENIES leave to assert a trade secret misappropriation claim against
`ReShape Lifesciences.
`
`V.
`
`CONCLUSION
`
`For the foregoing reasons, the Court GRANTS in part and DENIES in part Fulfillium’s
`motion for leave to amend as follows:
`
`The Court GRANTS leave to amend to allege infiingement of the ’367 Patent;
`
`The Court GRANTS leave to amend to allege trade secret misappropriation against SV Health,
`but DENIES leave to amend to allege patent infringement against SV Health; and
`
`The Court DENIES leave to amend to allege trade secret misappropriation against ReShape
`Lifesciences, but GRANTS leave to amend to allege patent infringement against ReShape
`Lifesciences.
`
`Plaintiffs shall file an SAC in accordance with the above within two days of this Order.
`
`IT IS SO ORDERED.
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`Initials of Preparer
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`CV—90 (06/04)
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`CIVIL MINUTES — GENERAL
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